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GAS EQUALS POWER IN RUSSIAN-ARMENIAN RELATIONS
Institute for War and Peace Reporting, UK
IWPR Caucasus Reporting #690
June 5 2013
Russian-controlled monopoly is bumping up fuel prices for
cash-strapped Armenians.
By Armen Karapetyan - Caucasus
CRS Issue 690,
The Russian-controlled firm that holds a monopoly over natural gas in
Armenia has secured an increase in retail prices, as part of a move
towards charging the same as western customers pay.
The state commission that regulates prices for monopolies allowed
ArmRosGazprom to raise its prices by 18 per cent. That was not the 67
per cent the company wanted, but experts warn that even the lower
increase will harm the country's already fragile economy.
>From July 8, Armenian consumers will pay 156,000 drams, 374 US dollars,
for 1,000 cubic metres of gas compared with the 132,000 drams they
currently pay. The increase will have a knock-on effect on the price
of electricity, since 40 per cent of Armenia's power is generated by
gas-burning stations.
ArmRosGazprom's argument for charging 221,000 drams per 1,000 cu m
was that it was paying more for the gas it bought, and as a result
it had been operating at a loss for two years.
The Russian gas giant Gazprom has an 80 per cent stake in the firm,
and the Armenian government owns the remaining fifith.
Gagik Makaryan, head of the national Union of Employers, said rising
gas and electricity prices would be a "major blow" to productivity.
"Even if the gas price increases by 18 rather than 67 per cent,
there's no guarantee that we won't see... electricity becoming more
expensive," he said. "That will have a negative impact on small and
medium-sized businesses, which have still not recovered from the
financial crisis of 2008-09."
Armenak Chatinyan, economics columnist for the Orakarg daily, predicted
that the forthcoming limited price increase would not be the last.
"I want to remind you that Gazprom's leadership has said many times
that from 2015, the price of gas sold to Armenia has to be the same
as the international price," he said. "We can therefore expect an
increase next year as well."
Armen Poghosyan, head of the Union of Consumers, warned that higher
energy prices would have an inflationary effect across the economy.
"It's no secret that gas and electricity play an important role
in shaping the prices of key goods. If gas and electricity prices
rise, this will result in increased prices for many foodstuffs and
transport," Poghosyan said. "To put it mildly, that isn't the best
news for Armenia, where a third of the population officially lives
below the poverty line."
Officials promised that the government would take steps to limit the
effects on the poorest members of society, but opposition members
doubted that would be possible.
"While this government has been in power, 200,000 people have
left Armenia, mostly because of the socioeconomic problems. Those
problems still exist," Artsvik Minasyan of the Dashnaktsutyun party
said. "When the government says it will take steps... I don't take
it very seriously."
Armenia imports its gas through two major pipelines, one coming
from Russia via Georgia, and the other from Iran. Both belong to
ArmRosGazprom.
Chatinyan says current ownership structures leave Armenia over-reliant
on Russia.
"In recent years, the government has taken no steps to diversify the
energy system and at least partly remove it from Russian control. They
built the Iran-Armenia pipeline in 2007, but the government handed
it over to ArmRosGazprom," he said. "Why did they do that? Why has
financial management of the entire gas and electricity distribution
network, the Hrazdan power station, the Sevan-Hrazdan hydroelectric
plant, and the Metsamor nuclear power station been transferred to
Russian companies?"
Last year, ArmRosGazprom imported two billion cu m of Russian gas
and another 500 million cu m from Iran, most of which is burned by
power stations rather than households.
Asked why Armenia remained so dependent on Russian gas, Energy Minister
Armen Movsisyan said the Iranian fuel was more expensive. He did not
furnish any more details, and many experts remained unconvinced.
"Because of the international sanctions, Iran has no access to markets
and lacks the options that Russia has for exporting gas. So Tehran
tries to remain competitive by lowering prices," Ruben Mehrabyan,
an expert at the Armenian Centre for Political and International
Studies, said.
Mehrabyan said Moscow had a habit of using energy supplies for
geopolitical ends.
"You mustn't forget that supplying gas through a pipeline is political
leverage which Russia will naturally use against Armenia just as it
does against other countries," he said. "Russia has made it its aim
to maintain its political influence in Armenia and to get Yerevan to
join the [proposed] Eurasian Union."
Armen Karapetyan is a freelance journalist in Armenia.
http://iwpr.net/report-news/gas-equals-power-russian-armenian-relations
From: A. Papazian
Institute for War and Peace Reporting, UK
IWPR Caucasus Reporting #690
June 5 2013
Russian-controlled monopoly is bumping up fuel prices for
cash-strapped Armenians.
By Armen Karapetyan - Caucasus
CRS Issue 690,
The Russian-controlled firm that holds a monopoly over natural gas in
Armenia has secured an increase in retail prices, as part of a move
towards charging the same as western customers pay.
The state commission that regulates prices for monopolies allowed
ArmRosGazprom to raise its prices by 18 per cent. That was not the 67
per cent the company wanted, but experts warn that even the lower
increase will harm the country's already fragile economy.
>From July 8, Armenian consumers will pay 156,000 drams, 374 US dollars,
for 1,000 cubic metres of gas compared with the 132,000 drams they
currently pay. The increase will have a knock-on effect on the price
of electricity, since 40 per cent of Armenia's power is generated by
gas-burning stations.
ArmRosGazprom's argument for charging 221,000 drams per 1,000 cu m
was that it was paying more for the gas it bought, and as a result
it had been operating at a loss for two years.
The Russian gas giant Gazprom has an 80 per cent stake in the firm,
and the Armenian government owns the remaining fifith.
Gagik Makaryan, head of the national Union of Employers, said rising
gas and electricity prices would be a "major blow" to productivity.
"Even if the gas price increases by 18 rather than 67 per cent,
there's no guarantee that we won't see... electricity becoming more
expensive," he said. "That will have a negative impact on small and
medium-sized businesses, which have still not recovered from the
financial crisis of 2008-09."
Armenak Chatinyan, economics columnist for the Orakarg daily, predicted
that the forthcoming limited price increase would not be the last.
"I want to remind you that Gazprom's leadership has said many times
that from 2015, the price of gas sold to Armenia has to be the same
as the international price," he said. "We can therefore expect an
increase next year as well."
Armen Poghosyan, head of the Union of Consumers, warned that higher
energy prices would have an inflationary effect across the economy.
"It's no secret that gas and electricity play an important role
in shaping the prices of key goods. If gas and electricity prices
rise, this will result in increased prices for many foodstuffs and
transport," Poghosyan said. "To put it mildly, that isn't the best
news for Armenia, where a third of the population officially lives
below the poverty line."
Officials promised that the government would take steps to limit the
effects on the poorest members of society, but opposition members
doubted that would be possible.
"While this government has been in power, 200,000 people have
left Armenia, mostly because of the socioeconomic problems. Those
problems still exist," Artsvik Minasyan of the Dashnaktsutyun party
said. "When the government says it will take steps... I don't take
it very seriously."
Armenia imports its gas through two major pipelines, one coming
from Russia via Georgia, and the other from Iran. Both belong to
ArmRosGazprom.
Chatinyan says current ownership structures leave Armenia over-reliant
on Russia.
"In recent years, the government has taken no steps to diversify the
energy system and at least partly remove it from Russian control. They
built the Iran-Armenia pipeline in 2007, but the government handed
it over to ArmRosGazprom," he said. "Why did they do that? Why has
financial management of the entire gas and electricity distribution
network, the Hrazdan power station, the Sevan-Hrazdan hydroelectric
plant, and the Metsamor nuclear power station been transferred to
Russian companies?"
Last year, ArmRosGazprom imported two billion cu m of Russian gas
and another 500 million cu m from Iran, most of which is burned by
power stations rather than households.
Asked why Armenia remained so dependent on Russian gas, Energy Minister
Armen Movsisyan said the Iranian fuel was more expensive. He did not
furnish any more details, and many experts remained unconvinced.
"Because of the international sanctions, Iran has no access to markets
and lacks the options that Russia has for exporting gas. So Tehran
tries to remain competitive by lowering prices," Ruben Mehrabyan,
an expert at the Armenian Centre for Political and International
Studies, said.
Mehrabyan said Moscow had a habit of using energy supplies for
geopolitical ends.
"You mustn't forget that supplying gas through a pipeline is political
leverage which Russia will naturally use against Armenia just as it
does against other countries," he said. "Russia has made it its aim
to maintain its political influence in Armenia and to get Yerevan to
join the [proposed] Eurasian Union."
Armen Karapetyan is a freelance journalist in Armenia.
http://iwpr.net/report-news/gas-equals-power-russian-armenian-relations
From: A. Papazian